apple is an investment. i always like to say there's a bull market okay? all right? i'm jim cramer and i will see you tomorrow. good evening, everyone. i'm larry kudlow. this is "the kudlow report." president obama goes before business leaders and says "we could get this done in a week" when it comes to the fiscal cliff. but tim geithner just told cnbc that we're going to go over the cliff unless tax rates go up. at the same time, two dozen republican house members signed

a bipartisan letter with democrats defecting from the boehner plan. in the meantime, a nice game for the day for the dow, but a stunning selloff for apple. do you know what? fiscal cliff or not, the s&p 500 is up 12% year to date. that is a handsome gain for investors, an optimistic year, believe it or not. and we already bailed out detroit's auto industry. but now, at least one motown politician is telling president obama he should bail out detroit bankrupt city government, too. this sure isn't the free market, and i asked why should a texas taxpayer bail out detroit? breaking news from syria, and it is a blockbuster. the assad regime is walking and loading its chemical weapons, ready to use them on its own people. nbc's chief pentagon correspondent joins us now. jim, is this the red line president obama was warning about?

>> well, not quite yet. u.s. officials tell us that the syrian military is poised to use chemical weapons against their own people, and all it would take really is the final order from syrian president assad. but we have learned that as of today, all the precursored chemicals for that deadly nerve gas have in fact now been loaded on to aerial bombs, but those bombs are still in the depots. they haven't been loaded on to airplanes yet, and president assad hasn't given the order. but they're pretty close, larry, and that's why earlier this week, of course, president obama issued a very strong statement aimed at president assad saying look, if you use these weapons against your people, there will be serious consequences, but that's where somewhat of the problem lies. >> listen, i want to ask you, one of the parts of the red line statement by president obama and secretary of state clinton, that

if there was movement of any chemical weapons of mass destruction, movement -- now, as i listen to what you're saying, there hasn't been movement. it looks like they're getting ready where they are, but they haven't moved yet, so maybe they haven't violated the red line exactly. >> that's right, larry. they've got everything in place to do that. but what are the possibilities here? u.s. military officials say it would be very difficult to target certain areas. there are possibilities if they're going to load them on the planes. they could use cruise missiles to attack airstrips, for example. they can't blow up the weapons sites themselves, otherwise then the deadly gases could be spread among the public and kill thousands. the only other option according to some people that i've been talking to over the past couple of days is possibly take those cruise missiles and aim them not only at the airport strips, but at regime targets. even perhaps president assad himself. but so far, we haven't gotten

there, the big question is can the u.s. react quickly enough if suddenly president assad says go and those bombs are loaded and those jets take off. >> all right, well, we will keep close track of this story. thank you very much for helping us out. now folks, we switch gears back. we still have no fiscal cliff deal, but there's talk between president obama and tim geithner. congress has adjourned for a long weekend. that's kind of insane. eamon javers joins us. >> reporter: the president began his day this morning before an audience of business leaders and he continued his campaign of persuasion amongst some of the nation's top ceos. >> i am passionately rooting for your success. because if the companies in this room are doing well, then small businesses and medium sized businesses up and down the chain are doing well.

if companies in this room are doing well, then folks get jobs, consumers get confidence, and we're going to be able to compete around the world. >> and then larry, later in the afternoon, our steve leishman sat down with treasury secretary tim geithner. geithner in that interview late in the afternoon made it clear that this is brinksmanship of the highest order. >> i want to understand the administration's position when it comes to raising taxes on the wealthy. those making more than $250,000. if republicans do not agree to that, is the administration prepared to go over the fiscal cliff? >> oh, absolutely. there's no prospect for an agreement that doesn't involve those rates going up on the top 2% of the wealthy. it's only 2%. >> reporter: of course, up on capitol hill, republicans don't necessarily agree with that. speaker of the house john boehner said today that he is still waiting for a counterproposal now from the president of the united states.

and we learned late this afternoon that in fact speaker boehner and president obama had a phone call today. we don't know, however, what was said in that call. but reports are that some progress is being made in these negotiations. at least conversations continuing behind the scenes between the top leaders, larry. >> all right. a phone call. that's pretty good progress. many thanks. so let's just ask a couple questions here. does president obama have the whip hand in all these negotiations, and are the republicans about to be blamed big-time for falling off their own fiscal cliff? joining me now is ace pollster scott rasmussen. i just did a little tv gig with scott, who's in about 60 cities across the country. all right, scott. you heard timothy geithner. he said if they don't raise taxes on the rich, they were going to go over the fiscal cliff. but at the end of the day, if we do fall over the fiscal cliff, if taxes go december 31st, will

the republican party be blamed? >> absolutely. right now, people aren't convinced that either the president or congressional republicans are serious about negotiating. but they're a lot more willing to believe that the president is negotiating in good faith. >> and let me ask you. is the republican party therefore becoming the party of the rich, defending the top tax brackets, and is obama becoming the party of the middle class? >> absolutely. and larry, the reason the republicans are in this fix right now is because they think these discussions and negotiations are about deficit reduction. president obama thinks they're about fairness. most americans, solid majority, want to see taxes raised on those upper income americans, even though only 19% think it will have much of an impact on deficits. it's not about the fiscal crisis. it's about fairness in the minds of most americans.

president obama understands that and republicans don't. >> is that because in your polling day, i always thought that people favored spending reduction and favored smaller government. this may be a mistake that the gop has not emphasized spending cuts. >> they certainly do. most people -- two out of three people want to see a deal that includes both tax hikes and spending cuts. they want to see more spending cuts, but they don't expect spending cuts to come out of this no matter what happens. in fact, the one thing that most people in the middle class believe is that regardless of whether we go over the fiscal cliff or whether a deal is reached to avert that, middle class taxes are going up, and so is spending. so there's a lot of cynicism in this process. >> real quick -- >> that's why the president has the edge. >> bottom line, the republicans are poised to take a fall? is that what your numbers show you? >> they are poised to take a hit on this right now. longer term, tim pact will weigh on the obama administration if

the economy doesn't recover. >> all right. many thanks, scott rasmussen, appreciate it very much. >> thanks. with just 26 days until we fall off the tax and fiscal cliff, two dozen house republicans have apparently defected from the boehner plan and signed a bipartisan letter with democrats. people are now asking is there a fallback position for the gop? well, here now to tell us is house majority whip california republican kevin mccarthy, the number three man. mr. mccarthy, as always, thank you for coming back on the show. can i get your comment on this letter, two dozen republicans, they're talking about tax rate flexibility along with a bunch of democrats. what's your take, sir? >> well, remember what they're saying here. what they're saying is that they're going to put everything on to the table. what we've been talking about for so long is where the president has been awol, this is a spending issue that we have a real problem with. we agree that we'll provide revenue, but we do not want to hurt a pro growth economy here.

so it's how you go about it. that's why we think the rates have to be frozen. the other thing we're look at, the president says he wants a balanced approach. he hasn't talked about anything about where are the cuts of spending. and that's what we really want to talk about. >> just one more on this so called bipartisan letter that just came out this afternoon. we don't know all that much about it. i just want to ask you, is there any hint in the talks between the white house and the house of representatives? any hint that there is flexibility? in other words, instead of going to 39.6, might go to 37%. there's also talk instead of raising the capital gains and dividends tax, maybe you leave those two alone and go to 37, 38, 39%. are those iterations possible? >> what talks? this president has not been engaged. we said here are some ideas that we want to see cuts.

he took three weeks to respond. and then he brought geithner down, who proposed more spending and offered something even democrats in the senate won't even vote for. they put forward his budget that not even one democrat has vote for. i don't want to be under a false impression here, but there are no talks going on. we are trying to get to talks. we do not want to go off the fiscal cliff. that's why we quickly responded to another proposal to the president. but the president refused to have a discussion. >> there's other reports that say republicans are looking for a fallback position, if he can't get the capps on deductions for more tax revenues and so forth. and it's going to be tax rates that the republicans might just vote present. some might vote present. some might vote aye and deal with the rates next year is. that just pure press speculation or is there anything to it? >> look, those are all press stories that are out there. we're trying to solve a problem.

because if that came to fruition, that does nothing to solve the problem. and we just have an unbelievable amount of growth in government where we have to control the spending. if we want to truly save medicare and social security, we've got to do something about it. that's what republicans have been proposing all along. we want to solve a problem once and for all. and that's why we haven't waited -- it's interesting that we're just now talking about it. but back in july, we passed legislation that would freeze the rates, deal with sequestration, make the cuts that needed to take place in spend sog we wouldn't be at this dilemma in december at this time. the president was on the campaign trail then. we thought he'd get off the campaign trail now and stop politics and start focusing on policy. >> can i ask you one last one quickly. the original across the board spending cut for sequestration was i believe $1.2 trillion. >> yes. >> in the republican proposal, you all seemed to have $200 billion as some kind of substitute. what's going to happen to the other trillion dollars in

spending cuts that people expected? >> well, we believe you take care of it right now for a couple years. we're looking to not just solve this problem overall. we want to have overall tax reform next year and you could take care of the rest of that then. so it gives you a little time. so wouldn't face it right now next year, but also buy you some time, reform overall tax, expand the growth that holds us back, and then we can talk about solving the rest of it. >> so the spending cuts would really be next year. the spending cuts, once again, would be manana. >> no, no, we also have spending cuts right now. but sequestration is $60 billion just this year. so we can take care of that now with spending cuts, but we buy out more than one year and then we ask for total tax reform next year that can solve the overall problem then. we don't wait for another day. that time has passed in washington. that has got us into this problem. we want to stop that and really

return that we have real growth going forward. >> thank you very much, mr. kevin mccarthy. thank you very much. >> thanks very having me. so bailout detroit? no way. one motown councilwoman says yes. she says president obama owes it to them. don't forget, folks. free market capitalism is the best path to prosperity, not bailouts, thank you very much, but free markets. let detroit take care of detroit. i'm kudlow. we'll be right back after this. [ male announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha! bp has paid overthe people of bp twenty-threeitment to the gulf. billion dollars to help those affected and to cover cleanup costs.

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we already bailed out a couple of its auto companies, but now should the federal government bail out the entire city of detroit? incredibly, some say yes. ahead of president obama's visit to detroit monday, that will be his first in nearly eight months, detroit councilwoman e joe -- joanne watson thinks so. >> our people overwhelmingly supported president obama and quid pro quo. >> joining me is doc thompson of talk radio 1270 wxyt. doc, welcome. let me start without this thought. if you have a federal bailout of detroit, doesn't that mean that

citizens, taxpayers of texas, let's say, would in effect be part of the bailout of detroit? and why should texans bail out detroit in detroit can't manage its own books? >> they shouldn't. they shouldn't bail us out and we shouldn't bail out other people. let the local people bail themselves out. but i want you to think how brave joanne watson was to admit her failures. because it's her failures, the rest of council's failures, the mayor's failures. >> is this the usual stuff that the government unions pay themselves too much, their pensions are too big, their health benefits are too big and therefore they're bankrupting the city? is that the principal cause here? >> that's a major part of it. this is the culture that's been going on for 50, 60 years in detroit. you've got the big unions there that are just taking their cut of it, keep wrachratcheting it more, but you also have a culture of ineptitude in detroit.

right now you have kwame kilpatrick on trial for corruption. you have monica conyers, wife of john conyers, the congressman, who is ready to get out of jail in a couple weeks for her corruption charges. this is what detroit is about. ineptitude, corruption, and big union thuggery. maybe that's redundant. >> where is mayor dave bing on this? i thought he was going to be here. i know governor snyder has tried to essentially take over detroit, but i don't think he succeeded. so where is bing on this? >> dave bing has come out and said yeah, people have an entitlement mentality. the workers in the city of detroit, he knows. dave bing has done some things wrong, but he's a lot closer to it than joanne watson is. the governor tried to take over, tried to use an emergency manager power to say that the state can take over. and the city of detroit, the people went nuts. they called it racism, they called it all kinds of stuff and said they're taking away our vote. larry, i stood with them. i said you're right, those people should have their vote. but when detroit screws up, when

the mayor of the council screws up, you're on your own. don't expect a bailout from us if you want that local power. >> we're going to leave it there. doc thompson, thank you very much. well put. so cliff or no cliff, is there a war against capital going on? this is part of the story. art laugher is going to tell us why you can't have capitalism without capital. you'll want to hear this. [ male announcer ] when gloria and her financial advisor

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webster tells us there are two top words people look up in 2012. one of those words was capitalism, as in free market capitalism, and socialism, as in european socialism. both words rose to the top because of the presidential campaign along with globalization and democracy. of course, there is no question in my mind that capitalism is the better word and the better system. but you already know that. because we say it every evening. washington now is in a war on capital, most regrettable. in a fiscal cliff free fall, tax rates on capital gains could rise to 24%. those dividends could increase to a whopping 44%. here now is former reagan economic adviser art laugher. how can you have capitalism without capital and why is there a war on capital, that includes cap gains, that includes dividends which will triple. it also includes the estate tax. why is there a war on capital?

>> i have no idea, larry. i think it's just pure politics. but it's sort of lovely the words and looking them up. i understand that the french don't have a word for entrepreneur or laissez faire. [ laughter ] >> because they never use it. >> they never use it. economics is all about incentives. if you tax people who work, you pay people who don't work, don't be surprised if you find a lot of people not working. it's the rich issue here, which is just fascinating to me. if you tax rich people and give the money to poor people, you're going to get lots and lots of poor people and very few rich people. just look at what happened in britain two years ago when gordon brown raised the highest tax rate from 40% to 50%. the number of millionaires reporting income for tax purposes went from 16,000 down to i think 6,000. they're losing all sorts of money and it's a double dip recession. these guys, it's just incredible what they're doing. they think that if you tax job

creators, job creators are going to create more jobs. it's crazy. >> how can you have new businesses, how can you have new ventures without capital? it's the basis of the system. >> you can't. >> and if you're penalizing capital with higher tax rates, as we are across the board, how can this possibly lead to economic growth and job creation? no one's really talking about this. >> it's exactly right. you fine people for speeding to get them to slow down and not speed. you raise taxes on cigarettes to get people to stop smoking. yet now you're going to raise taxes on rich people and job creators to get them to do what? create more jobs? this is just double think craziness. >> here's the killer question for you. the killer question. >> i'm ready. >> given a choice, would you rather raise the ordinary income tax rate and leave the capital gains tax rate alone? would you do that? >> you know, i'd really like to see what we did in '86 and just

have a flat tax across the board, including capital gains, including everything. i'd love to see unrealized capital gains taxed at a very low rate but then the basis raised. just the full simon definition of a flat rate tax and just be done with it and doing serious business. >> but are we going to have a recession next year because he's taxing capital and every other bloody thing? >> yes, i do believe we're going to have a recession next year and i just seriously hope that boehner and the republicans let the president get what he wants on -- at least below $250,000, and then the republicans should pass a bill extending the tax cuts for the upper income groups. let it fail in the senate and then obama owns this economy and then 2014, larry, we've been around a long time, 2014 is not that far away, and then we take the country back and provide the prosperity that these guys have deprived us of and that's what's really necessary. but it's crazy. >> art laffer, thank you very

much. now, why are conservatives being purged by the republican leadership? this is a most peculiar and damaging story. [ male announcer ] this december, remember -- ♪ you can stay in and like something... ♪

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welcome back to "the kudlow report." in this half-hour, why is republican leadership purging conservatives? don't they have enough trouble getting a deal on the fiscal cliff? is the gop splintering? one of the stars of the shark tank is worried about the future of entrepreneurs in america, and she is about to join us to tell us why. but first up, speaker john boehner issued a warning for house republican today. the leadership is watching how they vote. this episode of conservatives will remove from key committee posts today and today we learned that house leaders were using an apparent secret list of criteria for who stays and who goes. here with the scoop, cnbc contributor from national review online, robert costa. what's up with this? i want to just add, senator jim demint coming out forcefully against speaker boehner's plan,

and house member jim jordan also coming out against the plan. is the gop splintering? is there a civil war? >> larry, i'm here on capitol hill and what a raucous day today was for conservatives. you never really hear about it, but there's a group on capitol hill called the republican steering committee. they're a private group of lawmakers that decide committee spots and they announced that four lawmakers, popular conservatives from the class of 2010 and beyond would lose their coveted committee spots in places like the financial service committee and the agriculture committee and even the budget committee because they're not voting with leadership. there is irking a lot of conservatives because they think boehner is trying to exert too much control as these fiscal cliff negotiations continue. >> let's see if i get this right. top of the daily crawler website, a good one. conservative groups launch campaigns to depose boehner from speakership. i think that's hardly going to happen, but the american majority action, ama, is launching a #fireboehner

campaign. how deep is this splintering? this always happens during tough negotiations. boehner i think is trying to rise above partisanship and get a deal. i think he's been very valiant. but sit going to take a toll on the gop internally? >> larry, i was at a very prominent conservative meeting in washington today, and you know who showed up? a congressman from kansas. he was booted off of his committee earlier today and he was very angry talking to conservative activists. here's why conservatives are angry. as this fiscal cliff negotiations continues, they think boehner is trying to warn conservatives about going against any kind of deal he cuts with the white house. so as a warning, boehner is saying i'm going to boot you off your committee if you go against something i do. a lot of conservatives don't like it when he plays hardball. they're going to continue to fight back just like senator demint is doing right now. >> but he's also going to lose some votes on the moderate side. a couple dozen republican house members signed a bipartisan

letter that says let's look at all kinds of tax rates, not just the deduction, but tax rates in relation to other spending. so you've got republicans jumping ship on both sides. >> that's exactly right. the speaker is going to have to make a critical choice, because the lines are being drawn in the sand right now here on capitol hill. you have the conservatives who are being booted off the committee. they're very angry with the speaker. they're not going to move at all on tax rates. but you've got a lot of moderates in the republican conference from the suburbs and other places around the country who are saying obama won, maybe got to give them a little bit of room on rates. >> all right, robert costa, we'll see how this whole thing turns out. now let's break down today's market action. the dow popped. unfortunately, apple dropped. the dow jones was up 83 points. apple fell about 6.5%. here now to help us break it down, danielle hughes, ceo of divine capital markets. it's very interesting to me. fiscal cliff or not, china, europe, whatever, the s&p 500 up

12.1% year to date. that is a good year. that is an optimistic year. why is that? >> it seems like we're forgetting about that, doesn't it? with all this talk about what's happening going forward and concern about corporate growth. and truly, we're concerned about corporate growth as well because there really hasn't been that long-term information from our government, from our policyholde policyholders, no economic policy in real investment in assets that we've seen. that's going to be a problem going forward, not to mention the global slowdown, and we're hitting the top of corporate profits now. >> so you don't agree with this. you're turning bearish. >> not bearish in a sense of going forward intermittently. we think that most likely, we're going to see some growth hitting in the second quarter of next year. until we get through this fiscal cliff nonsense, until we see some growth coming out of china and europe, i think that -- >> china i think is showing growth. europe may not show growth in my lifetime, but they're going to be bailed out. do you think stock market -- i

know it's had a mini correction since mid september, but it may be coming back now. question, does the stock market in its wisdom see a deal from washington on fiscal policy? >> i think that the stock market has already -- doesn't care about that anymore. we're on to the next thing. >> what is the next thing? >> even if they don't come the a deal, they will two weeks later. >> so might come in the new year. >> it might come in the new year. >> january, stocks are already discounting that. >> with band aids and glitter stickers, something is going to happen eventually. we have discounted that. this has been on the table for two years. this is not a new thing. it's their way of staying in the spotlight. >> question, apple which lost 6% today, apple is down about 24% since mid september. >> that's right. >> is apple the way -- you know, when we used to look at ge, the way we used to look at ibm, the way we used to lock at ford and gm as a bellwether for the american economy. is apple's drop of 24% saying to us the u.s. economy is going to slow down, people aren't going

to buy all these gadgets, or is it saying something else? >> no, i think so. i think we're seeing a pullback in apple. i think apple is going to be a bellwether for years to come. i still think they have a lot in their pipeline. the reason for the drop-off of apple is multiple. but today in particular, at&t said there's softening in the pipeline. >> that's what i mean. you're saying if apple is seeing a softening in its pipeline and its orders -- >> but it's on a quarter by quarter basis. >> does it mean that the economy here is slowing down? is that a signal the way the old ge and ibm used to be a signal? >> it could be. but i don't think so. i think apple, we're going to see that turnaround next year. apple is up tremendously this year. >> i understand. >> 50%. >> i understand. is it higher capital gains tax coming? people want to take their gains from apple. and maybe other stocks, too. >> it could very well be. we've seen some real big numbers. c-gate sup tremendously this year as well. some people are taking some money off the table with the insecurity with what's going to happen with taxes.

i don't think it's going to say to anybody who owns stocks, we're going to just completely wipe you out going forward. going to see a massive pullout of the stock market. that's not what they want. that's not what they've been promoting the last two years. >> gains of 15 to 24%. is that a wipeout? no. why double tax capital? anyway, thank you, danielle hughes, we appreciate it. there is a major stir tonight over a cartoon narrated by actor ed asner. check it out. >> over time, rich people decided they weren't rich enough, so they came up with ways to get richer. the first way was to tax cuts. they said why should i care about other nonrich people? >> all right, this here is just an attack on free enterprise. shame on mr. asner, who's a good actor. it's an attack on success. it's an attack on capital itch.

it's also an attack on good taste, although we didn't show the most vulgar part. where does a successful actor like this get off saying this kind of thing? what does he know about capitalism anyway as he makes his bucks, and by the way, this entire cartoon was sponsored by the teachers union. what a shocking surprise there. they, too, higher taxes on the rich, knock down free market capitalism, go up against free enterprise. you know, when is this left wing stuff going to end? i guess the answer is never. my next guest is bringing a lot of attention to the gun control debate with piers morgan on twitter. by the way, i think she won that twitter debate. first, let's read the tweets. morgan tweeted, this is a quote, the second amendment was devised with muskets in mind, not high powered hand give up guns and assault rifles, to which carol roth respond, it was devised for people to be able to protect themselves with the same type of

weaponry used by those from whom they might need protection. piers morgan said where exactly does it say that in the constitution? ms. roth, right next to the word musket. here is carol roth, the bestseller of "the pure equation." this is great stuff. first of all, why did you take on piers morgan? >> well, larry, piers and i have a long history of going back and forth on things. and every once in a while, he says something and i just feel the need to educate him. and i am very passionate as many americans are about our second amendment rights, and so i was originally just trying to explain to him. i wasn't trying to be nasty. i was really trying to make him understand where this debate was coming from, and he backed me into a corner and so i came back with a musket. >> well, i think that musket thing was absolutely terrific. but i've got to ask you, i need some help here.

i'm going on the piers morgan show tonight. we're going to talk about taxes and regulation spending. so i'm not going to tweet, carol. i'm actually going to be there signature across from him. what should i do? >> i think you'll be fine. piers kind of tends to go to the socialist side of things. he's from britain originally, and he doesn't understand the capitalist system all the time. so i think if you and i just keep educating him, keep explaining to him things like the second amendment, like the free enterprise system, like capitalism, i think eventually it will get through to him. >> how is free enterprise doing? how is free market capitalism doing? i'm kind of worried, carol. we just showed this ed asner cartoon, which is a pretty disgusting thing. this guy who is really kind of a fat cat actor -- actually, kind of a fat actor, but he's worth a lot of money. god bless him, i'm not opposed to that. why does he have to attack people who made money legitimately? how is free enterprise doing? >> i think there is a

bifurcation in the country and a lot of confusion over what is at the source of our problems. the problems are that we have $16 trillion in debt, and that was caused by government overspending, and the problem is that we have a sluggish economy. and raising tax on the rich doesn't solve either of those problems. so i think it's very sexy for those who have their own agenda to push this. oh, the rich don't want to participate. but it's not addressing the core problems and that's my issue with it. i'm very much about personal responsibility and personal accountability. and i think that factors in whether you're talking about government spending or you're talking about the gun control debate. it all boils down to being responsible and accountable for your actions and i think if we can get that throw people, all of this becomes very common sense. >> that's well said. i took down everything you just said, i'm going to make notes. i may tweet it and i may try to get it out tonight. >> i'll be supporting you tonight, larry. and i will actually be there as well. >> thank you, carol. carol roth. her book, by the way, is "the

entrepreneur equation." please go out and get it. you've seen my next guest on the hit show "shark tank." that's the show that's like "american idol" but it's for entrepreneurs. but she says government policies are killing entrepreneurship and she is very worried. so am i. two years ago, the people of bp made a commitment to the gulf. bp has paid over twenty-three billion dollars to help those affected and to cover cleanup costs. today, the beaches and gulf are open, and many areas are reporting their best tourism seasons in years. and bp's also committed to america. we support nearly 250,000 jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger.

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welcome back to "the kudlow report." everybody is back at work at the board of los angeles after the $190,000 per year clerical workers finally agreed to a tentative deal. they ended a very expensive strike that occurred for no good reason. once the federal mediators were called in, the union caved fearing they'd lose that outrageous compensation package. i can't think of anything better that they caved. "shark tank", a hit show. one of the judges is lori grenier and she's worried about taxes and regulations and the whole business psychology, from what i gather. lori joins me right here. what do you look for? you're a judge at this "shark tank thing." so it's a reality show. >> it is.

>> what do you want to see? >> i want to see things that i think are going to be successful. whether it's new product or business idea. i'm looking for what i call a hero. and i can tell pretty much instantly if it's a hero or a zero. >> an entrepreneur has to have character. >> yes. they do. >> and you're looking for some form of character. >> you hit it right on the head. if i don't like who the person is, i don't care how great the idea is, i have to have the right mix of both. >> all right. what makes an entrepreneur? in other words, somebody flips an idea but they might not be a real entrepreneur. that's what i'm saying. okay, a lot of people have a lot of good ideas, but they have no capacity to follow through on the ideas or get the idea funded. now, i'm a free enterprise guy. i'm a free market guy. i worship at the shrine of entrepreneurship. but how do you know -- you're sitting on this show, and you have to judge these people. how do you know? >> i think you can tell by talking to them. you can tell how intelligent they are. you tell how experienced they are. you can tell if they have the heart, soul, passion, drive to

get something done. sometimes an entrepreneur maybe isn't very -- doesn't have a good personality. they're not going to be a great salesperson. but they might have the heart and the passion to drive the business forward. so then you know that they're going to be good about what they're doing, but maybe you need to have somebody else do the sales. >> all right. so it's all there. you've got that package and you know what to look for, you've done this show. so why is venture capital down? why are new business starts, new business formations are the lowest they've been, i don't know, in how long. it's over ten, 12, maybe 15 years. why is this not happening in america? there's probably a lot of americans who would meet your criteria, but it's not happening. what's wrong with this? >> well, the small business administration says that small businesses currently represent 9 98% of all of the businesses. so are you sure that they're down? >> new business formations are way down. >> way down. >> and venture capital is way down. that means people are afraid of

something. these are brand-new business start-ups, a very important economic measure, way down. >> well, i think, to me, i'm an entrepreneur, and i think that true entrepreneurs, it doesn't really matter what's going on in the economy, if they come up with a great business idea, great product, they're risk takers. they're going to go for it. it doesn't matter if the taxes are up 5% -- it doesn't matter what is going on with that. they are people that are just pioneers. they're going to forge ahead and start that business no matter what. >> i had my pal art laffer on and we were talking about capital. capital is going to be taxed much more heavily, no matter what happens with the fiscal cliff. the tax rate on capital gains, for example, which is a key tax on wealth and risk taking and entrepreneurship, has gone up. is that going to make it harder? >> well, it might make it harder, but i don't think it's going to stop people. and that's my point. i think it doesn't really matter. to me personally, it wouldn't have mattered when i started my business 16 years ago.

>> what is your business? >> my business, i create products. i have a lot of patents. i have over 115 patents and i've created over 400 successful products. did i stop and think about what my taxes were going to be? no. i thought i want to be independent, i want to run my own business, i don't want to work a 40-hour job and punch a clock every day. and so when you come up with that idea, if you're passionate about it, you're just going to go forward. it really doesn't matter what's going on with the economy. >> all right, we're going to leave it there. i hope you find some more entrepreneurs. appreciate it. now switching gears, please listen to this. civil war and chemical weapons in syria and riots in egypt. the totalitarian regimes of saudi arabia, yemen and the list goes on, as you know, but guess what, the geniuses at the world bank think is the most pressing problem in the arab world today, global warming. a report yesterday from the world bank urges arab countries

to ensure their national poli policies were "climate resili t resilient." good luck with that. you don't think they have other bigger fish to fry? the whole region is blowing up. global warming. world bank. anyway, question. how is the solid black vote for democrats hurt african-americans? we have a former nfl player and super bowl winner who says the answer is it's hurt them a lot. you don't want to miss this. he's next up. you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here. ♪ ♪

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senator tom coburn has done it again. key, new hampshire. population 23,000. they bought a bearkat armored vehicle to police events like the pumpkin festival. arizona bought surveillance cameras for a spring training baseball complex. columbus, ohio, bought an underwater robot to help with rescues. coburn wants to know and we do too why we're not spending more wisely on security, or just not spending it at all. >> both parties tend to divide americans into our voters and their voters. let's be really clear. republicans must steer far clear of that trap. >> that was congressman paul ryan saying it was time to reach out to all american voters.

fine sentiment, but are they? here now we bring in burgess owens, a former nfl player and super bowl winner who says his community has been hurt badly because of its solid loyal toy the democrats. he's also the author of "it's all about the team." thank you for coming on. i don't know if you heard what paul ryan said. but blacks -- let's see. 95% of african-americans voted for president obama in this last election. what do you make of that? what does that tell you? >> well, the first thing we have to start looking at is what it's going to take for us to get the respect of both parties, and that comes down to us being a people that are principled over anything else. we have 95% of any race that would vote for a person or party, it kind of helps them to be taken for granted. at this point, what does the democratic party have to do to win our vote? actually, just be around. so it's time for us as a people to start putting our principles first. i think we should be ashamed of

ourselves in certain areas, those who decided that the education is so important to them, they have a passion for it. why would you vote for a person who decides the union is much more important for them. >> in other words, school choice. i'm going to read from the notes. you tell me if i'm wrong. but this is tough stuff. you say in your notes, obama is the most aggressive anti-black policymaker in modern history. that's tough stuff. i hope i have it right. if i do, sir, what do you mean? >> you have it exactly right. because at the end of the day, it's all about policy. it's not about race or the color of a person's skin. if you have a policy of abortion where the black race is being depopulated, in the state of new york, there's more abortions than birth, that's depopulation. if you have a policy in which 5,000 children, black kids in louisiana, or 2,000 children in d.c. are taken out of good schools and put back into failing schools because they decide that the union is more

important, that's anti-black. you're looking at the davis bacon act, which is anti-black entrepreneurs, which unions are given precedent over black businesses in the black community, or you look at minimum wage, which is very advantageous to the unions, but keeps black teenagers from getting opportunities to get a chance to work. there are many, many policies that have been put in place by liberals -- >> you're basically saying the entitlement state, government direction, and government dependency is hurting the black community. that seems to be your message, am i right there? >> that's the message, and we have a 50-year opportunity to see what's happened to that. my dad's generation would be ashamed to see what's happened to the men of our race. we have black middle class, we should be the people that pull the others out and we're standing by being silent. the whole idea, the fact that what liberalism does to a race,

it actually -- it makes people and particularly men wimpy and winy. i think it's time for us to stand up and be strong about what we need to get done. be courageous and have a vision the way previous generations did and stand up for children particularly. >> i have to leave it there. many thanks, the outspoken burgess owens. that's it for this evening's show. thanks for watching. free market capitalism is the best path to prosperity for everybody, for all people in need of opportunity. i'm larry kudlow. we'll see you tomorrow night. [ male announcer ] where do you turn for legal matters? at legalzoom, we've created a better place to handle your legal needs. maybe you have questions about incorporating a business you'd like to start. or questions about protecting your family

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